Humour has a habit of hiding truth by default. A remark made in jest by an economist friend resonated with reality. Can India’s Prime Minister or finance minister do without an Arvind in North Block? Lutyen’s Delhi is yet to reconcile to the disruptive political idea of Arvind Kejriwal. The eponymous syndrome has now affected even PM Narendra Modi, so much so that he simply could not ignore the talents of an economist with World Bank connections for running the Indian economy. North Block has been, of late, grappling to find an Arvind with the appropriate degree and connectivity to act as an accelerator or at least a stabiliser of India’s growth trajectory. Both economic and political observers are keenly monitoring the movements and appointments of key advisors and officials at the Centre. They expect a bureaucratic establishment with a significantly new look in line with the new dispensation’s thinking. Last week, Modi decided to import from Washington DC, Arvind Subramanian as India’s 12th Chief Economic Advisor (CEA). The chair has been lying vacant ever since the UPA government appointed Raghuram Rajan as the RBI governor.
But all Arvinds do not lead such a charmed life. On the same day, Modi shunted out Finance Secretary Arvind Mayaram from North Block to the little known Patel Bhawan as Tourism Secretary. It is for the first time that a Finance Secretary has been transferred to such a relatively insignificant ministry. At the same time, the PM overlooked the claims of Arvind Panagariya, a fellow Gujarati and a foreign-educated economist who is the toast of the saffron chatterati class. Panagariya was the frontrunner for the CEA’s post and was backed by credible economists like Jagdish Bhagwati. But the PM chose a South Indian Arvind instead, whose spoken language is listed as Hindi over others. Earlier, Arvind Virmani had served as CEA from 2007-09.
On a serious note, Subramanian’s appointment raises an issue about the essential qualifications for the appointment of a key government advisor. Modi is the first homegrown leader to wear his Swadeshi credentials on his sleeve. He speaks in an Indian language and promotes Indian ideas and icons. But the compulsion of global connectivity has forced the Swadeshi politician to depend on a World Bank/IMF-pedigree economist to carry forward his growth model. So far the PM has shown a different style and approach in running the government. When it came to putting together a team for economic reforms, however, he has followed the formula set by predecessors, from Rajiv Gandhi to Manmohan Singh, of looking for external experts.
Subramanian is one of the most respectable global economists. It is not a coincidence that Modi decided to limit his choice to a group which has been connected with the Brentwood institutions like the World Bank and International Monetary Fund (IMF). In fact, barring Bimal Jalan, the former RBI governor, and Deepak Nayyar, the former V-C of Jawaharlal Nehru University, all the CEAs who came later were actively associated with the World Bank or IMF. Even Montek Singh Ahluwalia, who served as CEA to Manmohan Singh (a former CEA himself) when he was P V Naransimha Rao’s finance minister, was a nominee of Washington-based banks. Later on, economists like Shankar Acharya, Ashok Lahiri, Kaushik Basu and Raghuram Rajan, too, were associated with the Fund banks before being appointed as CEA. The process of borrowing people from overseas started in the early 1990s, when the finance ministers of Pakistan, India and Bangladesh were chosen from among economists who had worked for the IMF, World Bank or other international financial institutions. As one of the desi Leftist economists put it, “It appears that we have an unwritten agreement with the World Bank and IMF that India would keep one of their representatives in North Block to keep a watch on things. Afterwards, they all return to Washington after retirement.”
Subramanian is not an exception. An author of numerous books, the 54-year-old is currently working as a Dennis Weatherstone Senior Fellow at the Peterson Institute for International Economics. Earlier he was associated with the IMF as an assistant director in the research department. He is known more as a trade economist than one with the expertise needed to manage the macroeconomic issues confronting India. He has written extensively on WTO matters and India’s policy on World Trade. He has been critical of India’s stand in the WTO on food subsidy. He had also chastised NDA’s first interim budget. Modi has shown magnanimity in appointing him in order to get a contrarian view on his own economic philosophy. But some economists have raised questions about Subramanian’s suitability for India, which needs to put its internal monetary and fiscal policies in place. If Modi’s eyes are set on increasing the nation’s share in international trade, then Subramanian is perhaps the best bet. But the question is, why were macroeconomists like Subir Gokarn, the former RBI deputy governor, and Urjit Patel, the current deputy governor, ignored? Though both have foreign degrees and IMF and World Bank connections, they were found not wired enough abroad. According to government insiders, Subramanian was picked because Modi is looking to play an important role in dictating the direction of the global economic agenda, like Manmohan did during his first tenure as Prime Minister.
The appointment of Subramanian and Rajiv Mehrishi as the new Finance Secretary, along with a new Coal Secretary indicate that Modi is not only shaking up the Civil Services, but is also giving it a new shape. During the past four weeks, he has ordered the reshuffle of over 40 joint secretaries and about a dozen secretaries. He has even overturned Manmohan’s directive, which made it mandatory for the Cabinet Secretary to consult the minister concerned before appointing any secretary or joint secretary in his ministry. Now the PM alone chooses the secretaries. He even holds regular review meetings with them. He wants them all to communicate with him directly. Since Modi has made development his mission, he is discovering the tools and personnel who can deliver his idea of ‘Swachh and Swasth Bharat’ (A Clean and Healthy India). Perhaps he is not able to get indigenous people qualified enough to serve as his companions in Vikas Yatra. Modi appears to be filling the talent deficit gap by importing skills for now. So far he has been a campaigner, not a crusader. In the next few weeks, India may see a fully constructed Modi Sarkar in place, with or without the help of videshi men and material.
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